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Iger became Disney’s CEO in 2005, following a rough five years for the company that included a hostile takeover attempt, a shareholder revolt, and a battle with two prominent board members. High on his agenda was ending the internal warfare and winning back employees’ enthusiasm and admiration. He also needed to help the company see technology as an opportunity rather than a threat and to strike the right balance between tradition and innovation. It was time, for example, to move on to computer-generated animation—and even to update the bland Mickey Mouse, who was originally meant to be impish and irreverent. (Donald Duck filled that role after Mickey became a corporate symbol and a role model for kids.)

Iger is a strong believer in taking big risks, in being accessible, and in paying attention to one’s instincts. He’s driven by challenges, as an early experience shows: At the age of 23 he was told by his boss that he wasn’t promotable. He believes that a CEO’s role involves determining strategy; establishing ethics for the company, its employees, and its products; and hiring and motivating great people.

In this edited interview with HBR’s editor in chief, Iger talks about executive compensation, the changing nature of stock ownership, Disney’s use of social media, and the company’s new theme park in Shanghai.

He wasn’t the odds-on favorite to succeed Michael Eisner. But when Bob Iger became CEO of Disney, in 2005, he confounded the skeptics. He quickly moved to calm the infighting that had roiled Disney, and then he launched the media giant into profitable new ventures. In this edited interview with HBR’s editor in chief, Adi Ignatius, Iger talks about leadership, creativity, and a controversial effort to reinvent the iconic Mickey Mouse.

HBR: When you became CEO, Disney seemed fairly dysfunctional. How did you confront that?

Iger: We had been through a rough five-year period, with a hostile takeover attempt, a shareholder revolt, and a battle with two prominent board members. Those things created a tremendous amount of distraction and a negative perception of the company. I felt I had a great opportunity to get the company believing in itself again and, in doing so, have others believe in us. I articulated that I wanted Disney to be one of the most admired companies in the world—admired by our customers, by our shareholders, and by our employees. I wanted our people to be enthusiastic again about the company they work for.

What were some of the toughest initial challenges you faced?

Well, I had to negotiate with Roy Disney and Stanley Gold, the two board members. That would have been difficult if not impossible for my predecessor, Michael Eisner, to do—not through any fault of his but because the damage in that relationship was irreparable. I was new. Although I was seen as part of the old regime, I could portray myself as a potential peacemaker. And that’s exactly what I did. I put the battle behind us.

What did that mean for the company?

It was a big deal, because warfare is extremely destructive and distracting for companies. It’s very difficult to run a company when you’re embattled—you’re fighting wars instead of being productive. I worked hard at ending the wars. And when we did that, there was a sigh of relief at the company.

What was one of the first things you felt you needed to get right?

We had been viewing changes in technology as more threat than opportunity. I reversed that, because I really believed the company should look at technology as a friend. It had been part of the company originally: Walt Disney was a big believer in technology.

You’ve been quoted as complaining about the “baggage” of tradition. To what extent are you still resisting that?

There’s been tension for a long time at Disney between modernists and traditionalists. I firmly believe in respecting the tradition but making sure that it continues to evolve. If you’re too adherent to tradition, you tend to be less innovative. Every once in a while the staunch traditionalists at Disney still stand up.

So how do you find a balance between protecting a venerable brand and being innovative?

You can’t allow tradition to get in the way of innovation. There’s a need to respect the past, but it’s a mistake to revere your past. I make this point fairly often in the company—for example, with 2-D animation versus CGI [computer-generated imagery]. Are we blasphemous in saying that 2-D is largely a thing of the past, and computer-generated animation is the present and future? It’s all about creating a better experience for the viewer—and that includes 3-D.

What are some of the other fault lines between the old guard and the new guard?

We have discussions about Mickey Mouse: What should he look like? How should he act? How do you take a character who was created in the 1920s—and is the number one licensed character in the world— and keep him relevant? Some people say, “Can’t touch that.” Well, Walt did. Walt innovated constantly. There are people who believe you should only do things “the way Walt did.” That’s kind of silly. Walt died in 1966. If we completely stuck to his script, we would probably look more like the 1960s than like this decade.

It sounds like a strict constructionist’s interpretation of the U.S. Constitution. So how is Mickey Mouse changing?

The attributes we’re focused on for Mickey are exactly the ones Walt had in mind in the first place. The original Mickey was impish and irreverent. Walt sanitized him because when Mickey got so popular, there was a fear that his behavior was influencing kids. He toned Mickey down and brought in Donald Duck. Donald became the impish, irascible, troublemaking character. Over time, Mickey became more of an entertainer, a host, a corporate symbol—and less interesting. We’ve concluded that we need to return Mickey to what he originally was.

Before you succeeded Michael Eisner, some people underestimated you and said you’d never get the job. Did you use that perception to your advantage?

I never judge myself according to the expectations of others. I judge myself by the jobs I’ve been given over the years and by the extent to which I succeeded in those jobs. My daughters once asked me, “Dad, what drives you? Is it power? Money?” I said, “I’m driven by great challenge.” I loved the challenge of stepping up to run one of the world’s greatest companies and of following someone who had created such unbelievable value.

You’re the head of the world’s biggest media company. A few years ago that might have sounded like a curse. Is it OK now to be big in your business?

I don’t really think of Disney as big. We’re creating value with great products and great experiences and how they’re interconnected. The size of the company is manageable, and we don’t believe it’s a negative that will destroy value.

But surely size is a challenge?

There are perils related to size if it’s not managed right. The larger you get, the more careful you have to be about centralizing decision making. Centralized decision making has value when it comes to managing a brand and applying standards. But if you are large and diverse in terms of your businesses and the markets you operate in, it can be a real burden, because it slows things down.

What attributes do leaders need to have?

You’ve got to be an optimist. You can’t be a pessimist. When you come to work, you’ve got to show enthusiasm and spirit. You can’t let people see you brought down by the experience of failure. You don’t have that luxury. I believe in taking big risks creatively. If you fail, don’t do it with mediocrity—do it with something that was truly original, truly a risk.

Failure can be a great teacher in business. Is there an instructive failure in your past?

I’ve always believed that it’s important not to wallow in failure. I say to my people, “Don’t enjoy the success too long, because there’s always another challenge. But don’t allow yourself to be pulled down by failure, either. Learn from the mistake and move on.” In our company, because so many of the decisions are creativity-based, there’s bound to be a fair amount of failure. I programmed ABC in prime time for almost five years, and we had a lot of success. We had a lot of failure, too, so I learned how to contend with it very early on. You wake up in the morning, and those daily ratings come in. You look at those numbers and you think, Oh, my god. But you can’t stay in bed with the covers over you. You have to come to work. That doesn’t mean you ignore it or discount it—that would be wrong as well. But it has to be very carefully kept in perspective.

Now that you’ve been in the job for almost six years, what are the things that you’ve concluded only CEOs can and should do?

It’s the CEO who determines strategy, who is its major proponent, and who says, “This is where we’re going.” You also set the standards that are applied to your company: how people behave, how they treat one another, what ethics are expected of your company and its products, and how it behaves in the world. And you have to hire and motivate great people—nowhere is that as important as at the CEO level. I believe in the need to be a great student. I remind my 12-year-old son of this all the time when he complains about homework: “But you see Dad doing homework every night.”

And what should CEOs avoid doing?

You need to be deeply knowledgeable, but you can’t try to appear all-knowing—because you don’t know it all, and you shouldn’t act like you do. If you do, you’ll get closed off to other opinions, and that’s dangerous for a CEO. You need to be accessible, but you must balance your time very carefully. At some point you have to limit your accessibility and shut off debate so that you can concentrate and manage your time.

Do you view yourself as an instinctive leader, rather than one driven by the numbers?

I think there’s an element of instinct, of emotion, in every decision you make. We’re a creative company. I’m not a big believer in using research to determine what creative direction we should go in. I was at Harvard Business School a few years ago, and they were doing a case study on Disney’s Pixar acquisition. They did a really good analysis. But they didn’t understand the emotion that entered into the decision. That’s something you can’t measure at a business school and you can’t learn until you do it. That said, we’re an analytical company. We have really smart people who analyze potential business decisions. And certainly we create some sort of metrics before we invest significant amounts of capital. But in the end, even when you look at numbers, you have to make a gut decision or pay attention to your instincts in terms of whether you believe in the numbers and whether there are other factors at stake that you need to be considering.

Do you remember a “crucible” moment in your career?

One crucible moment occurred at the ripe old age of 23. I had a boss who told me I was not promotable. At 23 many people have nearly boundless potential, limited only by a lack of belief in themselves and their own capabilities. But I was raised to believe in myself. So when he told me I wasn’t promotable, I knew he was wrong and I wanted to prove it. I think it was a defining moment because it forced me to completely comprehend that part of me: I believed in myself.

The financial crisis has caused a lot of us to think about how to fix the system. One area to focus on is CEOs’ duty to deliver returns to shareholders and whether that’s ultimately inconsistent with creating sustained growth.

Short-term thinking versus long-term thinking. Unfortunately, all too often we’re measured on near-term results. That seeps into compensation strategies. Clearly, executives today are overcompensated for what they deliver short-term and undercompensated for their long-term investment. I have this challenge with my people, too. I’d like them to invest in our long term. But if we devote more resources to it today, we will lower our current margins and earnings. Fortunately, we’ve created the wherewithal to invest significantly in our future. But I think the attention to quarterly results is way too great in this country.

How did we get to this state?

Part of it has to do with the nature of stock ownership. The average time a shareholder owns stock now is substantially shorter than it used to be. That puts too much emphasis on current results. Plus we’ve seen a growth in business reporting—all of it about near-term results. There’s a kinship between that and Wall Street analysts’ expectations about stock performance.

Can you as a CEO steer clear of all that?

We don’t give earnings guidance. We haven’t done so in the five years I’ve been in this job. But then, you don’t give guidance, and you report a quarter, and all the headlines say you’ve missed Wall Street estimates! Well, what have you missed? You haven’t “missed” anything, because you’ve achieved what you expected. It’s not healthy.

So can CEOs themselves provide the solution?

I can’t fix any of it, and I can’t improve it. But as for how we run the company, I’ve tried very hard. And sometimes I have to force the discipline on myself, to put on blinders about what is expected. The so-called analyst consensus on what a company’s quarter is going to be should be completely irrelevant. It’s not, because it’s so hard to ignore. But we’re really trying not to run the company on the basis of short-term analysis.

Along those lines, suppose a shareholder got up at your annual meeting and said, “Are you really worth the $28 million you earned this year in salary, bonus, and stock?” What would you say?

Fortunately, we have a chairman and a compensation committee that can answer those questions. I don’t address the public when it comes to how I’m compensated, and I’d prefer not to now.

Well, I ask because you just said the compensation system doesn’t work and rewards short-term behavior.

Look, I am heavily incentivized to create long-term growth for this company, because I have a long-term incentive plan—stock options and other stock awards that not only vest over time but become available to me over time. Growing the company from now until then is something I’m highly motivated to do. But most companies’ compensation plans still favor short-term results. Our long-term incentives, while significant, don’t match compensation that is directly related to current results.

Should compensation committees be looking at things other than the share price?

We have a balance. I’m compensated on return on invested capital, on what we call operating income, on earnings per share, and then we also factor in how we’ve done against the S&P 500. So there are multiple metrics for our compensation, and for mine particularly. Most of mine is performance-based. But that performance is, again, more closely tied to the present than to the long term. So at least there’s alignment between how I’m compensated and how shareholders do with their investment.

Let’s talk about your customers. The rise of social media has given everybody a voice. How do you work that into your business?

On Facebook today more than 160 million people are in Disney-related groups. People love to be part of things Disney. That gives us access to those people, to provide experiences that are welcoming. There’s a whole set of mommy bloggers who write about Disney. We’ve started to engage with them. We invite them to events. I sat with a group of them on our new cruise ship. Who would have thought five years ago that someone like me would be sitting with a group of mommy bloggers on a cruise ship? The world has changed a lot.

There’s a whole set of mommy bloggers who write about Disney. We’ve started to engage with them. We invite them to events. I sat with a group of them on our new cruise ship. The world has changed a lot.

Do you have a Facebook account?

Yes, but not under my own name. I use it with family and key associates. By the way, I look every day at an e-mail in-box that is just “Robert Iger.” And on occasion I will respond to customers.

What about letting them help you create content?

I’ve found that when you take a committee approach to creativity, it usually fails. It dissipates one person’s deep passion for an idea or a creative direction. I don’t think you would end up getting better creativity if you let the masses create en masse. It’s tempting to, say, let everybody in the movie theater decide the ending, now that you’ve got digital cinema and you can provide three endings to a movie. It takes the storytelling out of it. It’s a gimmick. It doesn’t do it for me.

You recently finalized a deal for a theme park in Shanghai. China is proving frustrating for many investors. How did that experience go for you?

Well, the negotiation and the process to put a shovel in the ground for Shanghai Disneyland was more than a decade long. It redefines the word “patience” in many respects. But the reason we were so patient, or tenacious, or intent on getting something done, is that we believe this is a fantastic opportunity—perhaps the company’s biggest in the long term. The sheer size of the population in China, and the breathtaking changes we’re seeing in everything from technology developments to spendable income and growth of the middle class, made us truly believe in this opportunity.

How much do you alter to accommodate Chinese tastes?

We don’t take a cookie-cutter approach. You can’t take a park that was built in 1955 for California and plunk it down in the middle of Pudong. It’s tempting to believe that culture is being homogenized, but I don’t think that’s right. Pride in local culture, particularly in a place like China, has never been greater. Part of that is because of the incursion of culture from the rest of the world. All of us have an innate pride in who we are and where we’re from; that needs to be reflected and respected at Shanghai Disneyland. You’re not going to get to the castle by walking down Main Street, USA. I thought that smacked of cultural imperialism, and I wanted to avoid that.

You sound like a man who enjoys his job.

It’s a great job. We’re in the business of delivering fun. We entertain. Watching grandparents and parents and children enjoy a day at Disneyland is so rewarding. It’s also fun to run a company with this heritage. The place that Disney occupies in people’s hearts is special, and that’s something I appreciate and take seriously. There’s an obligation attached to being the steward of this great brand.

A version of this article appeared in the July–August 2011 issue of Harvard Business Review.

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